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Shire's
stock needs a dose of the biopharmaceutical company's own medicine to kick a lingering bout of weakness. Its American depositary receipts have been laid low in 2012, largely due to generic competition for one of Shire's top-selling ADHD treatments. But the selloff seems overdone, and the price can bounce back.

The ADRs (ticker:
SHPGshpg 1.634161206765199%Shire PLC ADRU.S.: NasdaqUSD266.81
4.291.634161206765199%
/Date(1438376400307-0500)/
Volume (Delayed 15m)
:
428457AFTER HOURSUSD266.91
0.10.03747985457816424%
Volume (Delayed 15m)
:
14765
P/E Ratio
17.02397815295484Market Cap
52462773358.2642
Dividend Yield
0.42929425433829316% Rev. per Employee
1201610More quote details and news »shpginYour ValueYour ChangeShort position
), which closed Friday at $91.18, could hit $115 in the next 12 months, an upside of more than 25%. Since the start of 2012, the ADRs have oscillated like a fever between good health and bad—a 52-week high of $108.79 and a low of $80.09. They have lost 13% in value since the start of the year, while Shire's industry peers are up 12%. It has a market value of $16.8 billion.

Dublin-based Shire has grown rapidly in recent years due to its focus on specialty pharmaceuticals for the treatment of rare illnesses and conditions like Fabry disease, Hunter syndrome, and ulcerative colitis.

The company's origin stems from its expertise in the treatment of attention-deficit hyperactivity disorder, which accounted for $1.55 billion of Shire's sales of $4.26 billion in 2011. Shire has a quarter of the U.S. market for ADHD treatments, which is growing at 10% a year.

It suffered a blow when one of its most popular treatments, Adderall, was exposed to generic competition in the second quarter and sales fell 32% in the third quarter. But Shire's other ADHD treatments—Vyvanse, its top-selling medicine, and Intuniv—are helping to fill the void. Both are growing at rates of more than 20% annually. As a result, Shire's third-quarter sales rose 4% year-on-year, in spite of Adderall's performance.

There are plenty of supplies in Shire's bathroom cabinet to keep sales growing. Some are aimed at treating conditions for which there are no approved therapies. Shire spent $770 million on research and development last year, or about 20% of sales. It continues to invest in its pipeline of specialty pharmaceuticals, human genetic therapies, and regenerative medicines. The company is also seeking regulatory approval for use of its ADHD drugs to treat other ailments.

The drop in Adderall sales won't inhibit Shire's ability to meet its earnings-growth targets in 2013 and beyond. Sales are forecast to grow at a healthy clip, to $4.68 billion in 2012, $4.95 billion in 2013, and $5.32 billion in 2014. Earnings per share should climb from $6.10 this year to $7.49 in 2014.

Shire's balance sheet is robust. It carries no debt and at the end of the September quarter disclosed cash and equivalents of $1.32 billion, or $7.08 a share. The company may be predisposed toward small acquisitions, but in October it announced a $500 million buyback, taking advantage of the low share price. That might be a precursor to a higher full-year dividend. The stock yields a miserly 0.5%.

A management change is on the horizon at Shire. Flemming Ornskov, currently an executive at
Bayerbayn.xe 0.791268758526603%Bayer AG ADRU.S.: OTCUSD147.76
1.160.791268758526603%
/Date(1438381200000-0500)/
Volume (Delayed 15m)
:
47971
P/E Ratio
29.946697472690055Market Cap
122703645694.846
Dividend Yield
1.6655725500812129% Rev. per Employee
452579More quote details and news »bayn.xeinYour ValueYour ChangeShort position
(BAYN.Germany), is due to become chief executive at the end of April, succeeding Angus Russell, who has led Shire for the past 13 years. However, the company's conservative approach is unlikely to change much. It has a winning formula that's provided a solid foundation for growth.

GERMANY'S BENCHMARK DAX index, which has gained 27% in 2012, closed Thursday at a five-year high. Europe's single largest economy should continue to defy the malaise across the region in 2013 as its export industries benefit from economic growth in the U.S. and Asia.

The Stoxx Europe 600 closed Friday at 279.17 points, up 1.2% on the week, led by a 2.4% jump in the basic materials sector.